How do I transfer ownership of an inherited property?

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A home, whether inherited or not can be the source of both happy and sentimental memories. Keeping the house can be the right decision to help create new memories, but sometimes, you may feel transferring ownership of an inherited house is better. This post will detail how you can do this.

Before you can transfer ownership of an inherited property, you must obtain ownership of the house yourself. This involves various legal processes, which we outlined in our previous post, A quick guide to selling an inherited house. Briefly there are four steps:

1) Completing a probate application form: The form can be accessed here. The Probate also allows you to transfer or sell the property afterwards.
2) Completing an Inheritance Tax form: The form you fill in depends on the house’s value and your relation to the deceased:
• IHT205 if the house’s value is less than £325,000 and left to a spouse or civil partner (or £425,000 if the house is left to children or grandchildren).
• IHT400 if the above does not apply to your situation.
3) Sending your application: To the Probate Registry and must include various information, such as an official copy of the decease’s death certificate.
4) Swearing an oath: The promise that all the information you have given is true.

After this, you can start the transferral process. This involves the following:

1) Fill in the AP1. This is an application to change the home owner on the register.
2) Fill in the TR1. This form allows you to transfer a registered property. If you are unsure if the house is registered, you can check its status here.*
3) You then need to fill in the ID1. This proves your identity when registering an application with the Land Registry. This form must be signed by a solicitor or licensed conveyancer.
4) Ensure you pay the right fee from the Fee calculator.
5) Send the above to the Land Registry.

Home ownership will then be transferred within 5-6 weeks.

*If you discover your house is not registered, you must follow the following steps to register it, and then go through the steps above:

• Fill in the FR1, the application for first registration.
• If not already within the deeds, create a scale plan detailing where the land is. Table 1 from GOV.UK’s, ‘Guidance for preparing plans for Land Registry applications’ can aid you with the measurements needed.
• Then depending on how you inherited the property, fill in either the AS1 or the TR1. You fill in the AS1 (‘whole of registered title assent’ form) if the house belonged to a sole owner and it’s been left to you in a will. You complete the TR1 (‘transfer of whole of registered title’ form) if you jointly owned the home with the deceased.
• Dependent on the value of your property, find the correct registration fee.
• Send the above to the Land Registry.

Things to Consider:

1) The effect on the mortgage
You will need to speak to your mortgage lender before transferring ownership. If the new owners will be using the same lenders, then the mortgage may just carry over, though this varies depending on circumstance. There will likely be administration and valuation costs to cover.

2) Do you still want to live in the house?
Even after the transfer, you may want to continue living there, for example, if you were giving your child the house as an early inheritance gift. You could get a, ‘lease of life’ – allowing you to stay in the property for the rest of your life. However, if your child decided they wanted to sell the house beforehand they would be able to do so, regardless of the lease.
Alternatively, if you pay them rent, the transferee may allow you to continue living there.

3) Tax
If you transfer the house, move out and live for another 7 years, there’s usually no inheritance tax to pay. If you die within 7 years, the home will be treated as a gift and is exempt from tax so long as its value is less than £325,000. If the house is worth more, your tax can range from 8-40% depending on the years between gift and death. See here for more detail.

Capital Gains Tax applies when the transferred property is not the transferees only residency. For example, if your relative is not living in the home when you transfer it to them and it increases in value when they decide to sell it. There is an annual capital gains tax allowance of £11,100. For any increase above this:

• The gain is taxed at 18% for basic-rate taxpayers.
• The gain is taxed at 28% for higher-rate taxpayers.

The transferee may need to pay stamp duty land tax if there is a mortgage attached to the house. The rate varies dependent on the house’s purchase price, from 0-15%. See here for the latest rates.

4) Other Risks:
• If you transfer your house to a relative who gets divorced, they may have to sell it as part of the settlement.
• If the transferee is declared bankrupt, the house could be claimed by the bank or lender.

Transferring an inherited house is a decision not to be taken lightly, as there are clearly many things to consider, and the processes involved can be long and arduous. Consulting a solicitor is advised as this post provides only a general guide, and everybody’s situation is different.

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